The internet leads insurance customers to choose on price
The internet can be a boon to insurance companies, helping them to manage policies cost effectively. But it can also lead their customers towards choosing on price alone.
Data from advisory services firm, Compete Inc., shows that customers are increasingly choosing insurance on price rather than on brand. While traditional insurance carriers can see advantages in encouraging customers to research and manage their policies on the internet, there is a drawback. A number of insurance distribution sites now make it so easy for customers to compare prices that many of them do this almost exclusively.
The distribution channels minimise the contact that consumers have with the insurance carriers, and this lessens the chances the carriers have to present value propositions other than price.
Two distinct customer types According to Derick Sutton, VP of Advisory Service for Compete, "On one hand, distributors expand the market reach for carriers by broadening their channel. On the other hand, distributors channel customers to the low-cost provider more often than not, exacerbating price sensitivity and policy churn. We see two distinct customer types emerging in the insurance market: churn-prone, price-focused purchasers who view insurance merely as a commodity product, and service-oriented, brand-focused customers who perceive their policies as a differentiated service. Clearly the challenge for insurance carriers is to enable the latter, without jeopardizing their channel."
What to do about it Compete recommends that insurance carriers reinforce branded customer relations, to encourage the customer to view policies as differentiated services rather than commodities. In addition, they should be transparent when quoting, giving customers access to competing quotes while encouraging them to look beyond price at the same time. They should also recognise that consumers' behaviour changes over time, so should monitor these trends to reduce customer defection and maximise acquisition opportunities.